Diesel prices fell yesterday as petrol rose because of a tax increase, but the AA says diesel should have dropped by three times more than it did.

Yesterday the price of petrol at most service stations rose 3 cents a litre because of an excise tax increase which will be used to pay for roading and public transport through the National Land Transport Fund.

But diesel prices, which have no excise tax, fell 2c a litre, which Z Energy said was because of decreased international demand caused by summer in the Northern Hemisphere.

A litre of 91-octane was now 223.9c, while diesel was 151.9.

Fuel's inflation-adjusted all-time high is 246c a litre, reached in 1981 in the wake the Iran Revolution oil-shock.

AA PetrolWatch spokesman Mark Stockdale said the fall in diesel prices had come despite a slight increase in the commodity prices and imported costs of both petrol and diesel.

But the 2c reduction had not been enough, he said, as there was room for diesel to fall by 5c to 6c a litre.

"Diesel importer margins are well above average so a price cut has been long overdue.'"